Cost of goods sold includes the expenses incurred to acquire and produce inventory for sale, including product costs, freight-in, and import costs. COGS is the second largest expense driver, accounting for nearly 41% of the company’s total expenses in 2019.
COGS have declined by nearly 25% over the last few years, falling $3.2 billion in 2016 to $2.4 billion in 2019 driven by improved pricing and lower levels of promotional activity, and favorable product and geographic mix, partially offset by higher inventory reserves.
Lower COGS coupled with stable revenues have helped Ralph Lauren’s gross margin expand from 54.9% in 2017 to 61.6% in 2019.
We expect COGS to remain constant at $2.4 billion in 2020, a gross margin figure of 62% for the year.
COGS steeply declined in 2018 primarily driven by lower non-cash inventory-related charges, lower levels of promotional activity , favorable geographic and channel mix, and lower sourcing costs.